DERIVATIVES PRICING AND RISK MANAGEMENT I

Università degli Studi
"G. d'Annunzio"

Chieti - Pescara

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Single discipline educational activity

Course Sheet

Course code:

000252L

Academic Year of enrolment:

2018

Year of supply:

2020/2021

Type of Course:

Related/Supplementary

Degree:

Course of 1st Cycle Degree in ECONOMICS AND COMMERCE

Disciplinary Sector:

Probability and Mathematical Statistics

Location:

PESCARA

Credits:

Programme Year:

Professor and Collaborators:

CECI Claudia

Cycle:

First semester

Hours of classroom activity:

Individual study hours:

102

Prerequisites:

Probability and Mathematical Analysis.

Objectives

The knowledge of the basic financial derivatives, the main mathematical models for risky assets price dynamics,
their hedging strategies and pricing. The course aims to provide specific quantitative knowledge:
- for professional figures operating in financial markets;
- for research activities in Finance;
- specialists in accounting and financial problems;
- profession of Financial Consultants.

Contents

Derivatives: forward, future e options and their properties. Binomial
trees: hedging and risk neutral pricing. Cox-Ross-Rubinstein formulas for
call and put. Black and Scholes model: hedging and risk neutral pricing.
Credit risk models: pricing of DZCB and CDS.

Extended Syllabus

Fundamentals of stock options. Lower and upper bounds for option prices, put-call parity.
Operational strategies through options.
Binomial trees: hedging strategy and risk neutral evaluation.
Pricing of American options.
The Cox-Ross-Rubinstein formulas for options.
Continuous time models: Brownian motion, geometric Brownian motion, Black & Scholes Model.
Ito's Lemma. Pricing of derivatives: Black & Scholes PDE and risk neutral valuation.
Black & Scholes pricing formulas. Volatility estimation. Delta-hedging.
Introduction to credit risk model: single bankruptcy unit and constant default intensity.
Pricing of Defaultable Zero Coupon Bonds (DZCB) and Credit Default Swaps (CDS).

Recommended Bibliography

- J. C. Hull, Opzioni, futures e altri derivati, 8a edizione. Il Sole 24 ore.
- Lecture notes provided by the teacher
- Exercise sheets available on the teacher's website (https://economia.unich.it/)
- The textbook is also available in English and the on-line material is available in English, upon request.

Teaching Methods

The course is structured in 48 hours of frontal teaching, consisting of
theoretical lessons and exercises sessions with the correction of exercises assigned by the
professor. The exercises proposed by the teacher allow to verify
the practical application of the topics seen at a theoretical level.

Evaluation methods

Verification of learning:

The final exam will consist of a written test consisting of exercises.
The written text can be taken in English upon request.

Contacts/More Information

Weekly office hours (see the teacher web page https://economia.unich.it/)
It is also possible online.
Email: c.ceci@unich.it
Office hours can also be in English.

Other courses

Course year: 1

ADVANCED CALCULUS
9 Credits - Related/Supplementary
PROBABILITY
6 Credits - Related/Supplementary
FOREIGN LANGUAGE (ENGLISH)
6 Credits - Language/Final Examination
PROBABILITY: PROBLEMS AND EXERCISES
3 Credits

Course year: 2

FINANCE
9 Credits - Characterising
FINANCIAL MATHEMATICS
6 Credits - Characterising
STATISTICAL METHODS FOR ECONOMICS AND FINANCE
9 Credits - Characterising

Course year: 3

ECONOMETRICS
9 Credits - Characterising
FINANCIAL ANALYSIS
9 Credits - Characterising
FINANCIAL GEOGRAPHY
6 Credits - Characterising
SECURITIES MARKETS
9 Credits - Characterising
DERIVATIVES PRICING AND RISK MANAGEMENT I
6 Credits - Related/Supplementary

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DERIVATIVES PRICING AND RISK MANAGEMENT I